Another crisis wasted

At El Alamein in 1942, British forces secured their first military victory of the Second World War. Winston Churchill assessed that Britain and its allies had ‘perhaps’ just reached the ‘end of the beginning’ of the war. But that didn’t stop him and other Western leaders starting to plan for life after the war. In Britain the government’s Beveridge Report was published in November that year, paving the way to the expanded welfare state that became a hallmark for the postwar domestic settlement. Less than two years later, with Allied armies only weeks into fighting their way across Europe and still heavily engaged in the Asia-Pacific theatre of war, their countries’ representatives convened in New Hampshire’s Bretton Woods. There they charted out what became the postwar international economic and monetary architecture that operated for the ensuing quarter century.

These ambitious initiatives remind us that huge crises, such as our coronavirus pandemic, used to be seized as opportunities to undertake radical longer-term planning. Judging by this week’s UK Budget package, this is not the case anymore. Times like this demand bold economic thinking. Rishi Sunak has squandered that opportunity.

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The economic transformation we need

One legacy of the pandemic has been to bring government activism out of the shadows. Whether you criticise or support how governments managed the pandemic, it is indisputable that their actions and inactions were of huge consequence to our lives and to the economy. So far, though, this acknowledgment has yet to unmask the myth that the past 40 years has been a period of state economic inactivity. Until this is understood, the current debate about state economic intervention will be misleading, when what we really need is a state-led shake-up of the failing status quo.

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Don’t blame Covid for economic devastation

It is unhelpful to present the economic disruptions over 2020 as costs of the pandemic itself. Claims that it is the virus, and not the restrictions, that is causing today’s devastating economic damage to production and jobs are misleading.

Understanding better how the economy is being hit is important for several reasons. A firmer grasp of all the costs arising from lockdowns and other official social restrictions is necessary for sound policymaking. Making decisions based on epidemiological models without a broader assessment of the costs – social, health and economic – and of how they have arisen is a reckless approach from political leaders.

Moreover, these other impacts from the pandemic measures are helpful in assessing the lessons to be learned in preparing for and managing future pandemics.

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Three myths surrounding Boris Johnson’s ‘New Deal’

Prime minister Boris Johnson’s ‘build, build, build’ speech on 30 June failed to throw much light on what, or if, there is a distinctive Johnsonian approach to economic policy. As many commentators noted, the £5 billion he pledged for various infrastructure deployments is a small amount for a government recovery plan, less than one quarter of one per cent of pre-pandemic annual output. This is like turning up to a battle with a water pistol.

As we assess the substance, if any, of Johnsonomics over the coming weeks and months of announcements, we can start by dismissing some of the fanciful narratives that are doing the rounds, both from the government’s supporters and its critics. The first, and most pertinent, myth is that the economic woes we face are primarily the result of the pandemic lockdown. In fact, they long predate it. The second myth is that we are entering a distinctive era of state economic leadership that marks the rejection of ‘neoliberal’ orthodoxies. And the third myth, given Johnson hails his plans as ‘Rooseveltian’, is that President Franklin Delano Roosevelt’s New Deal ended the Great 1930s Depression.

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Beyond the zombie economy

The UK’s productivity problem not only long precedes the Brexit discussions. It also long precedes the 2008 financial crisis. Longer-term studies actually reveal that the decline in productivity growth, not just in Britain but across mature industrialised countries, has been pretty relentless since the 1970s. That its slowdown began so long ago means the problem is deep-seated and therefore justifies a substantial strategic response. This is usually presented as an activist industrial policy.

But the big paradox about industrial policies is the contrast between the extensive cross-party consensus on this issue and the lack of headway in reviving investment and productivity. Read the full article here.